Life Insurance Help?

[Calamity Jane]

Mr PCG and I currently have Universal Life policies. I think they're each $150,000 though I may be off on that slightly, I'd have to look. Both policies run a total of about $100 a month.

Mr PCG wants to drop those policies and get 30 year term policies instead. It would be less expensive in the short term, but I'm concerned about actually having insurance when I'm older. And if I got a term policy now that expired just before I turned 60, what're the chances anyone is going to insure me?

The only time term insurance makes sense to me is as an additional policy... for the duration of a mortgage or something like that. To me, it's supplemental, not the whole deal.

Can anyone explain to me why Term might be the bertter way to go?

 

[brokenbrainwave]

UL's were hailed as the great saviour for retirement. They are not. It depends on when you took them out but there is a decent chance they'll lapse out even if you pay the premium.

Let me ask you one question, are you going to need 100k in protection at age 60?

 

[T.J. Jackson]

Term is better for a variety of reasons. The money you save by buying term insurance can be invested at a higher rate of return than the whole life or universal will return for you. This is provided you have the discipline to take the difference every month and invest it into a good mutual fund. Over the long haul even if your mutual fund earns just 1 % per year better than the whole life the difference will be huge. Make sure you buy convertable term insurance though. They will allow you to convert any amount of the term insurance over to whole life at any time during the contract. For instance....I have a 175,000 policy on myself right now. At any time during the ten years since I bought it I can convert some of that over to whole life. So If I wanted to do so, I could convert 30,000 over to whole life and still have 145,000 left of term. Or I could convert the whole thing if I wanted to do so. Term is always the better buy for you, not the agent because he makes less money on term. All that said and I ain't even selling insurance, I'm just a geek.

 

[Calamity Jane]

I can't really predict what I'll need at 60.

Granted, my concerns now won't be the same then. Right now I'm concerned with the fact that I owe almost 100K on my house and my kids are young (and I'm pretty sure if I were to croak, Mr PCG would need a nanny/housekeeper) .

In 30 years, I'd like to think that I woudn't have a mortgage and my kids would be providing me with grandkids to play with, but not worry about financially. But... I don't know that that will be true.

I don't really think about the Universal policy having anything to do with retirement. It's just one of those things that's there. I do worry about my life insurance expiring before I do, though.

 

[curious2c]

Hmmmm...Term is cheaper. That is about it. On a whole life policy you stand a chance of having somehting there at the end of the policy's timeline. You may need it (Or not) when you reach that time of your life.

Cicumstances in my life caused me to have to cancell out our whole life policy years ago. It was either that or put food on the table...food seemed to be the better of the two.

Since then I have kicked myself, even though it was beyond my control. Now when I go to get an insurance policy it usually requires a physical from a doctor before they will 'decide' if I am insurable. Since my wife smokes...well with her health thrown in, forget it. I have work insurance poicies on both of us and that will have to do. I am only 45 too. If you get out of your current policy, make sure you have some kind of coverage BEFORE you do.

Buddy of mine at work was changing his policies and then died in a car wreck...leaving his family zip...the new policy was not in force yet and the old one had been cancelled the month before.(He had just been to the agent for the new one and was on the way home from there when the accident occured.)
His family had it rough for quite a while. I helped as much as I could, but at the time we weren't much better off.

Think it through...sometimes you can invest the payment amount in stocks or bonds and do far better than you would with the policy, but until you have hit a certain level you are going to be behind that level of protection. Something to check into too.

 

[brokenbrainwave]

dammit, thats what I was gonna say nearly after getting her to admit she did not need 100k at age 60+.

what he said.

when you buy a UL or WL policy you're paying the companies for two things. 1.) coverage in case of death; 2.) investment. They are insurance companies, not investment guru's. Like T.J. said, you're better off taking the diff in premiums and investing it. Look for some premiums, take the diff and run it through an savings calculator at say even just 6% rate of return which is historically low. The results will be astounding.

Oh, to your q about obtaining insurance at age 60, anyone no matter of health can purchase a graded policy for final expenses.

 

[brokenbrainwave]

I can't really predict what I'll need at 60.

Granted, my concerns now won't be the same then. Right now I'm concerned with the fact that I owe almost 100K on my house and my kids are young (and I'm pretty sure if I were to croak, Mr PCG would need a nanny/housekeeper) .

you just answered your own question.

50k is not going to provide a nanny or pay your mortgage. Both of you are seriously under insured. I would convert to term and up my coverage at least triple. You might even be able to do this for the same money, or less.

 

[Calamity Jane]

Term is better for a variety of reasons. The money you save by buying term insurance can be invested at a higher rate of return than the whole life or universal will return for you. This is provided you have the discipline to take the difference every month and invest it into a good mutual fund. Over the long haul even if your mutual fund earns just 1 % per year better than the whole life the difference will be huge.

Are you that Primerica dude I dated?


Make sure you buy convertable term insurance though. They will allow you to convert any amount of the term insurance over to whole life at any time during the contract. For instance....I have a 175,000 policy on myself right now. At any time during the ten years since I bought it I can convert some of that over to whole life. So If I wanted to do so, I could convert 30,000 over to whole life and still have 145,000 left of term. Or I could convert the whole thing if I wanted to do so. Term is always the better buy for you, not the agent because he makes less money on term. All that said and I ain't even selling insurance, I'm just a geek.


I've never heard of convertible term. Something to ask the agent about, thanks.

 

[Calamity Jane]

you just answered your own question.

50k is not going to provide a nanny or pay your mortgage. Both of you are seriously under insured. I would convert to term and up my coverage at least triple. You might even be able to do this for the same money, or less.

Well, we have $150 each, not $50 each, and the way we have it planned, it would exactly cover what it needed to.

The term policy he wants to get on each of us is for $200K.

It's really weird to try and figure out how much you're worth, ya know? When we go the original policies, Mr PCG wanted only $50K on me because I'm a stay at home mom who 'doesn't contribute financially' I pointed out that he could never hire someone to do what I do, but that he'd need to try. Hence the $150K.

 

[T.J. Jackson]

Your welcome. I went through the insurance hassle when I bought my own business and figured it was time to grow up and get things straight. I learned a lot then and since I am friends with my insurance agent, rather than just him selling me something, he gave me the straight poop. Add up all your current debts, house, cars, etc. etc., include something for burial expenses and then add a year or two salary to it and that should be how much insurance you have. That way the surviving spouse has every thing taken care of by the insurance.



Oh and btw......DRAW UP A WILL. Don't wait if you don't already have one, do it now.

 

[brokenbrainwave]

Well, we have $150 each, not $50 each, and the way we have it planned, it would exactly cover what it needed to.

The term policy he wants to get on each of us is for $200K.

It's really weird to try and figure out how much you're worth, ya know? When we go the original policies, Mr PCG wanted only $50K on me because I'm a stay at home mom who 'doesn't contribute financially' I pointed out that he could never hire someone to do what I do, but that he'd need to try. Hence the $150K.

I misread it. I was thinking they were 50k policies. Lets see you smoke right? Does he?

The reasons I am asking are you're paying 100/month for policies that if whole life would be at least 50% higher. pcg, there is a high chance these things will lapse out. What kind of return rate was talked about?

For the record as you know I am a stay at home dad that works nights and weekeds with a 100k mortgage that has a 83500 balance. I keep 200k term on the both of us. His thinking is probably justified. Plus as TJ pointed out, any savings in premiums can be invested...

 

[Calamity Jane]

Your welcome. I went through the insurance hassle when I bought my own business and figured it was time to grow up and get things straight. I learned a lot then and since I am friends with my insurance agent, rather than just him selling me something, he gave me the straight poop. Add up all your current debts, house, cars, etc. etc., include something for burial expenses and then add a year or two salary to it and that should be how much insurance you have. That way the surviving spouse has every thing taken care of by the insurance.

We got our policies when Mr PCG started his business and I decided to stay home with the kids instead of working to pay for daycare. The only debt we currently have is the house, and we only owe $95K on it. If he were to croak, and I paid off the house, I'd need less than $1000/month to pay the bills and all that jazz.

On a side note, our current agent is a guy that I foxhunt with, so I know him pretty well on a personal and pofessional level.

Oh and btw......DRAW UP A WILL. Don't wait if you don't already have one, do it now.

I've been thinking about that too, but it's a whole nother argument waiting to happen.

I misread it. I was thinking they were 50k policies. Lets see you smoke right? Does he?

I think he'd still be considered a smoker, and I don't know if that's been taken into account on the quotes he's received... don't you have to be smoke free for a year for it to count? And yeah, I smoke.

The reasons I am asking are you're paying 100/month for policies that if whole life would be at least 50% higher. pcg, there is a high chance these things will lapse out. What kind of return rate was talked about?

I honestly have no idea. And I know that makes me sound like an idiot. My understanding was that the type of policy that we currently have (The UL policy) will pay out at $150K from the date of activation. IF there was additional monies in the fund portion, the beneficiary would receive that as well. That we could borrow against the fund portion if we needed to, and that it wouldn't change the actual insurance payout. Does that make sense?

For the record as you know I am a stay at home dad that works nights and weekeds with a 100k mortgage that has a 83500 balance. I keep 200k term on the both of us. His thinking is probably justified. Plus as TJ pointed out, any savings in premiums can be invested...